Breakfast cereal, water bottles, employees, exercise equipment, and medical supplies are just a few of a great many products the world is running short on. Whether it be longer Amazon Prime delivery times, no water bottles in the dining halls, or your favorite coffee shop running out of flavors, it is likely that you have been impacted by the current global shortage crisis.
The pandemic has upended almost every aspect of our lives, and it has disrupted the fundamental functionality of the global supply chain. The supply chain itself is rather simple. It is the logistical assembly line that transports goods from where they are mined, grown, or manufactured to the places around the globe where they are going. At the end of this line is the consumer, you, who pays for the product.
Unfortunately, COVID-19 disruptions to the supply chain date back to the early stages of the pandemic. Key global factories in South Asian manufacturing hotspots such as China, Taiwan, and Vietnam were greatly affected by the ramifications of the coronavirus outbreak; industrial giants shut down and reduced production because of sick or quarantined workers.
As a part of the continuing domino effect, shipping companies decreased their shipping schedule in anticipation of a mass contraction of demand for goods around the world. However, as our lives seemed to halt as a consequence of COVID-19, consumerism did not halt.
Limited to their homes which now needed to double as offices, gyms, and classrooms, people redirected their money towards quarantine expenditures. Some families ordered printers and weights for their new in-home offices and gyms while others required paint and wood for various DIY projects. The increase in demand for blenders, weights, and office chairs shocked the global supply chain where factories are typically able to predict a surge in demand.
The system became clogged. While companies were producing to satisfy surges in demand, shipping companies who had reduced their schedules were unprepared to distribute goods. Finished products piled up at popular warehouses and ports due to a shortage of shipping containers.
The combination of intense demand for shipping and a scarcity of vessels, the cost of shipping cargo skyrocketed. The journey of a container that once cost $2,000 could now cost companies as much as $25,000, causing many containers to be removed from ships and forced to wait, furthering the delays.
In the interim, a heavy influx of ships at popular ports across Europe and Northern America overwhelmed dock capacity and forced large container ships to remain at sea for days at a time. Overflowing warehouses, shipping containers, and ports has resulted in a pronounced global supply chain traffic jam.
As economies begin to open up, this supply chain backup is becoming a profound crisis. Doctors are unable to obtain necessary supplies and medicines to treat patients. New parents can’t purchase diapers, and the ongoing shortage of computer chips has impacted the production of laptops, phones, and cars.
In a CNN Town Hall on Thursday, October 21, President Joe Biden fielded a variety of policy-oriented questions and suggested he may be willing to deploy the National Guard to mediate supply chain issues, particularly to expedite the process by assisting in the unpacking of cargo ships.
For those of you wondering if there is an end in sight, it is likely that these issues will continue to affect markets into the new year.